The joining of Leidos and Lockheed Martin's IS&GS business has the potential to create the world's largest pure-play U.S. government solution provider, with more than 33,000 employees and $10 billion in annual sales, outsizing the recently created CSRA, which is currently at $5.5 billion in annual revenue.

The combined company -- which is slated to retain the Leidos name -- would harness robust capabilities across the intelligence, defense and civil spaces, and would hold a stronger position in everything from network modernization to aviation modernization.

Reston, Va.-based Leidos is financing the transaction through a $1.8 billion payment to Bethesda, Md.-based Lockheed Martin and issuing $3.2 billion worth of company stock to Lockheed shareholders.